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Lend

Interest rates

A reserve’s borrow rate follows its utilization along a two-slope curve: gentle up to the optimal point, steep past it.

The curve

Utilization is the share of a reserve that is borrowed. Drag across the chart to read the borrow and supply rates at any utilization.

Borrow APR Supply APR
Utilization72%
Borrow APR5.08%
Supply APR3.29%
Borrow and supply APR by utilization. The utilization shown is an example; the curve is the reserve’s own.

Borrow rate

U ≤ U*    rate = r* × U ÷ U*
U > U*    rate = r* + (r max − r*) × (U − U*) ÷ (1 − U*)
U
utilization: borrowed ÷ (borrowed + unborrowed)
U*
optimal utilization
r*
borrow APR at optimal utilization
r max
borrow APR at 100% utilization

For USDC, U* is 85%, r* is 6% and r max is 60%. The values for every reserve are on Parameters.

Supply rate

Suppliers share the interest borrowers pay, after the reserve factor, across the whole reserve.

supply rate = borrow rate × U × (1 − reserve factor)

For example, with USDC at 72% utilization the borrow rate is 72% ÷ 85% × 6% = 5.08%, and the supply rate is 5.08% × 0.72 × 0.9 = 3.29%.

What the kink does

Below the optimal point the rate rises slowly, so borrowing stays cheap while the reserve has room. Past it, each point of utilization adds far more: on USDC, 3.6 points of APR per point of utilization, against 0.07 below it.

The steep slope pulls utilization back toward the optimal point. Borrowers repay, leveraged positions close, and the higher supply rate draws new deposits, which keeps an unborrowed balance in the reserve for withdrawals.